How to Divide Stock Among Founders Without Ruining Your Startup Company

How to Divide Stock Among Founders Without Ruining Your Startup Company

Most startups guarantee their failure moments after their birth by making one or both of these mistakes. The most common mistake cofounders make is over-optimizing the division of control and ownership. Less common, but more common than you might suspect, are the cofounders who decide to “trust” each other and delay memorializing their agreements. Co-founders who make either mistake are dooming their companies — period.


In the startup world, the most ironic thing you can say to your partners is probably “trust me”. The problem is that when you’re starting a business the realities on the ground change so quickly that relying on the honesty or fairness of your co-founders, partners, investors, or vendors is a big mistake.

The coin of the realm in the startup world is trust — but it is also table stakes — you’re not going to get in the game or invite anyone to the game who you can’t trust in the first place. The most common reason partners, especially when forming new companies, delay documenting their agreements is because they don’t agree. More frequently than you’d imagine founders table important negotiations because negotiations are uncomfortable. The parties trust each other, but what they don’t realize is that what seems “fair” in the present can be very different from what was fair in the past or what will be fair in the future. Don’t start before you agree. See more...

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